EB-5: Flashing some green for a green card

View full sizeJoshua C. Cruey/Orlando Sentinel/MCTDavid Joyce poses for a portrait at his store USA Golf Outlet in Ellenton, Fla. last month. Joyce, and his family took advantage of a special visa program that allows foreign investors to take the fast track by investing $500,000 into a U.S. Enterprise that creates at least 10 jobs in a rural area or high unemployment area.

LOS
ANGELES -- David Joyce marched his way to the front of the U.S.
immigration line using his pocketbook, sinking half a million dollars
into a Vermont ski resort.

The British citizen
had spent years in a futile effort to secure green cards for himself,
his wife and their 9-year-old son so they could relocate to sunny
Florida. Then, a fellow emigre tipped him off to a little-known federal
program that helps foreigners gain permanent U.S. residency by
investing in American businesses.

"In six months, we had our green cards," said Joyce, 51. "Considering everything we've been through, this was easy."

Joyce is one of thousands of foreigners speeding through the U.S. immigration labyrinth -- for a price.

Those
who invest $500,000 in a U.S. enterprise that creates at least 10 jobs
in a rural area or a community with a high unemployment rate are
eligible for special visas that put them and their families on the fast
track to becoming permanent residents.

For some
wealthy immigrants lacking the family ties or special skills required
for traditional U.S. visas, it's the fastest way to establish permanent
residency apart from marrying a U.S. citizen. Investors aren't required
to work in the business or participate in its management; some never
even see the enterprises they buy into.

The
federal program, known as EB-5, is relatively small, capped at 10,000
visas annually. But applications have skyrocketed since 2006 as
entrepreneurs and cash-strapped towns have begun aggressively wooing
wealthy foreigners as a low-cost source of capital.

In
San Bernardino, Calif., the city is tapping EB-5 funds to redevelop its
downtown theater district. In Jupiter, Fla., overseas money is fueling
the construction of an outdoor amphitheater, marina slips and
entertainment hub. In Philadelphia, it was used to expand a hospital
complex and improve a school for disabled children.

Once
the federal government gives preliminary approval to a project and
conducts background checks, the would-be immigrant can invest in the
deal and apply for the visa.

But the government's initial approval doesn't always lead to desired results.

Some
immigrants have faced deportation when their investments failed to
create enough jobs or otherwise didn't comply with program rules.
Others have secured their green cards but lost their entire investments
when projects foundered.

Yet the prospect of U.S.
residency has proved so enticing that some are willing to take the
chance. Once approved for the program, the investor can apply for a
conditional green card, good for two years. If the investment creates
10 jobs during that time, he or she can apply to live in the U.S.
permanently.

Applications from mainland China
have soared in recent years, fueled by well-off parents eager to get
their children into U.S. schools.

"They can afford to do this," said Zhang Runan, an immigration attorney in Washington.

Proponents laud the program as a way to boost struggling local economies while rewarding immigrant risk-takers.

In
the hamlet of Jay, Vt., where Englishman Joyce was part of a $215
million investment pool, EB-5 money has helped finance luxury condos
and a new ice hockey arena. Up next: an indoor water park, a golf
complex and a hotel aimed at attracting more visitors to the ski town
hit hard by the recession.

"We tried going to
banks, but the lending environment was impossible," said Bill Stenger,
chief executive of the Jay Peak Resort. "There is no way we could have
done this without EB-5."

But some critics contend
this is little more than a cash-for-visa program, one that is more
beneficial to project promoters than the depressed communities it's
supposed to help. A cottage industry of middlemen has emerged to
introduce investors hungry for permanent U.S. residency to American
developers and communities eager for money.

A
flurry of EB-5-related websites has popped up with pitches written in
Chinese, Korean, Spanish and Arabic. Promoters regularly offer seminars
in hotel ballrooms in China, as well as in the U.S., proffering deals
and collecting hefty fees.

U.S. Citizenship and
Immigration Services, the federal agency that administers the program,
can't say how many net new jobs have been created.

Under
USCIS rules, the projects don't even have to hire 10 workers. Instead,
an investor's money can be used to preserve 10 jobs that economic
models show, and the government concludes, would otherwise disappear
without such funding.

"Immigration visas should
be precious," said David S. North, a research fellow with the Center
for Immigration Studies, a conservative think tank in Washington, who
has written extensively about EB-5. "The government is selling access
to this country and what are we getting in return? Very little."

No
city has encountered more strife with the program than
recession-ravaged Victorville, Calif. Foreclosures sprouted on nearly
every street. Unemployment soared past 16 percent.

So
local leaders hired William Buck Johns, a prominent Orange County
developer and Republican fundraiser, to help them set up an EB-5
regional center.

They traveled overseas seeking
short-term funding to continue redevelopment work at the former George
Air Force Base while the city secured permanent financing. Normally,
such bridge loans carry high interest rates and are backed with
collateral such as real estate.

Local EB-5
officials told foreign investors that Victorville would use their money
to complete work on a power plant, a railway center, a wastewater
treatment plant and other improvements to the former base, now called
the Southern California Logistics Airport, according to interviews with
city officials and documents obtained by The Times.

The USCIS green-lighted the plan. Investors flocked to the deal.

Last
year, though, the USCIS said it received complaints about Victorville's
regional center and began to investigate, uncovering a number of
problems. A chief concern: Only the water treatment plant was viable,
and it wouldn't create enough jobs to meet program rules.

The
USCIS kicked Victorville out of the EB-5 program in October, the first
time federal officials have decertified a regional center in the
program's 21-year history. By then, 17 foreign investors had
contributed $8.5 million.

As of June, the city
had refunded a total of $2 million to four investors who demanded their
money back. The status of the remaining funds isn't clear. Six
immigrants applied for visas, and the USCIS granted one, according to
federal court documents.

The USCIS and
Victorville officials declined to say what happened to the rest of the
investors. City officials said they did nothing wrong.

Victorville
recently sued the USCIS and government officials, claiming that they
had violated immigration law and exceeded their regulatory authority by
decertifying the regional center. The city wants to be reinstated in
the program.

Johns and his firm, Inland Group,
were paid at least $850,000 for their role in the Victorville regional
center, according to sources familiar with the deal.

Inland
Group is now pitching the Victorville projects to potential investors
under a new name: the High Desert Regional Center. A website registered
to Inland Group calls the venture "the easiest and fastest way to live,
work, study and play in the USA permanently!"

Johns did not return calls for comment.

The USCIS said the High Desert Regional Center isn't certified by the agency to be in the EB-5 program.

Congress
created the program in 1990 to attract wealthy Hong Kong residents
looking to flee the British colony before the 1997 transfer to
communist China.

Australia, Canada and New
Zealand were courting these emigres. To compete, U.S. lawmakers set
aside 10,000 visas annually for immigrants, their spouses and unmarried
dependents younger than 21 if they invested at least $1 million in a
business that created 10 jobs. The amount was later reduced to $500,000.

Federal
rules require that EB-5 applicants invest in projects operated by
private businesses, public entities or private-public ventures, all
known as regional centers. The USCIS vets both the regional centers and
the projects they propose.

For years, EB-5
generated little interest, in part because the rules were complicated
and the program proved vulnerable to fraud. Investor interest changed
after Wall Street's 2008 meltdown. When bank financing dried up,
business owners and real estate developers rediscovered the program and
headed abroad looking for investors.

In 2007,
just 11 U.S. groups were cleared by the federal government to offer
visas in exchange for investment dollars. This year, as of mid-August,
there were 171, and 48 are waiting for approval to launch or expand.

The agency has approved 43 regional centers to work on projects based in California, more than any other state.

One
of the largest and oldest regional centers is CMB Export in Rock
Island, Ill., which uses EB-5 money to revitalize mothballed military
bases. In California, it has worked with city officials in San
Bernardino, Loma Linda and Colton to redevelop the former Norton Air
Force Base, now San Bernardino International Airport.

As
of August, $96 million from foreign investors had been used to help
improve the airport and surrounding area, including construction of a
distribution and office complex for the Stater Bros. grocery chain.

Retailer
Kohl's, toy maker Mattel and others also leased warehouse and
manufacturing facilities in the area. More than 4,000 jobs have been
created so far, according to San Bernardino city officials.

"When
the meltdown happened, our unemployment shot up like a high
temperature," said San Bernardino Mayor Patrick J. Morris. "That money
helped us keep going. ... EB-5 money is crucial to us, then and now."

Such
stories have helped fuel interest in the program. But amid tales of
success, problems can go relatively unnoticed. In Dallas, the North
Texas EB-5 Regional Center is soliciting investors to build homes and a
mall on land tied up in a federal civil lawsuit in Missouri.

In
South Dakota, South Korean investors sank millions into dairy farms in
the mid-2000s. They lost their investment a few years later when milk
prices declined and several of the farms went out of business.

The
USCIS, by its own admission, has failed to closely track the flow of
EB-5 money, how the projects are being sold to investors or whether the
projects were successful. Instead, its focus has been on making sure
jobs are created -- but not that the jobs will last.

The
agency is in the process of overhauling EB-5, USCIS Director Alejandro
Mayorkas said. It is rolling out new rules that would require greater
scrutiny of projects, and it's hiring more people with economic and
legal expertise to better vet the business plans flooding into the
agency.

"We need to make changes for the program to reach its full potential," said Mayorkas.

Sun News Feature

It’s Your Business is a Sun News feature compiled by the business owners themselves to spotlight local small or new businesses on topics such as the business’ specialty product or service, history and any plans for the future. ... Tell us about your business»

Follow Us

cleveland.com is powered by Plain Dealer Publishing Co. and Northeast Ohio Media Group. All rights reserved (About Us).The material on this site may not be reproduced, distributed, transmitted, cached or otherwise used, except with the prior written permission of Northeast Ohio Media Group LLC.